Money Moves

Securing retirement income

By Max O'Brian

This is a fortnightly series of articles focusing on the banking and financial industries

Following the implementation of the MPF scheme four years ago, people in Hong Kong started to view planning an adequate retirement income as a key financial objective. This change in outlook is now having a noticeable impact on the financial planning industry.

"Nowadays, people are more careful about how their savings are managed," confirms Elex Chan, general manager of regional marketing and distribution for the Commonwealth Bank Group. "However, they should look not only at low-risk options for future financial security but also seriously consider investment tools which give higher returns and can generate a better retirement income."

In his opinion, the social security benefits that people now aged between 30 and 50 can expect to receive in 20 years time will be much lower than they are today. Demographic studies indicate there will be an overall ageing of the population. A higher proportion of people will live longer and be entitled to draw benefits. "We foresee the number of taxpayers supporting the system will fall dramatically," warns Mr Chan, "and this means that individuals should take steps to set up reliable retirement income schemes for themselves as soon as possible."

For this reason, banks and financial institutions are devoting more resources to the expansion of their personal financial planning businesses. "We are fully aware of the need to recruit more professionals who can educate the public about the importance of planning for financial security and can give appropriate advice," Mr Chan says.

He believes that the role of financial planning professionals will continue to change. "The industry will grow rapidly and the competition will be tough," he predicts. "However, any company that can offer their clients a full range of services, which take account of individual requirements and specific targets, will have an undoubted advantage."

Meanwhile, as the economic environment improves, investment products will become more diverse. Mr Chan says: "People will be guided by prospects for capital growth rather than interest rates when choosing products. Guaranteed income funds will become less popular, but investment-linked insurance products and retirement funds will be on the rise."

Taken from Career Times 29 October 2004, p. 2
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